News Tax 11th Dec 2019

Court of Appeal (Civil Division) rules no higher duty of care on public bodies conducting litigation

Joshua Carey appeared before Lewison LJ, Newey and Asplin LJJ on behalf of the Commissioners for HM Revenue and Customs (“the Revenue”) in The Commissioners for HM Revenue and Customs -v- Ian Charles t/a Boston Computer Group Europe [2019] EWCA Civ 2176.

The Court of Appeal unanimously allowed the appeal from the High Court (QBD).


In 2006 the Revenue were investigating a chain of transactions to determine whether it was tainted by fraudulent default. The visiting officer recorded all the participants for each of the six transaction chains. However, for one of the chains, she omitted the name of a trader, E-Management Solution Europe Ltd (“EMSL”).

Ian Charles t/a Boston Computer Group Europe (“the Respondent”) submitted a VAT return reclaiming input tax on his transaction. The Revenue verified a number of transaction chains including one that they found traced to EMSL. The Respondent was denied his input tax and subsequently appealed that denial to the First-tier Tribunal (Tax Chamber) (“FTT”).

The Revenue’s pleaded and evidenced case before the FTT was that the Respondent’s transaction connected with the fraudulent evasion of VAT and that the fraudulent defaulter was EMSL. They did not serve, nor did they rely upon, the visiting officer’s notebook.

The Respondent came into possession of the visiting officer’s notebook and served a copy of it as part of his evidence. He expressly indicated that he relied upon the visiting officer’s notebook because it showed, he said, that the transaction did not trace to EMSL. The FTT found that the Revenue had proved, through other evidence, that the transaction likely did trace to EMSL. Accordingly, the Respondent was unsuccessful in respect of that transaction (albeit he had other limited success for other transactions).

What followed was an extended and protracted series of appeals to the Upper Tribunal and complaints to various bodies. The Upper Tribunal gave extensive consideration to this issue, and whilst noting deficiencies in the FTT’s reasoning, concluded that the other evidence made it likely that the transaction chain traced to EMSL.

The Respondent then sought redress under the Revenue’s complaints policy. The Internal Governance report (“IG Report”) was published and stated that:

Mr Charles has been led to believe that the report was true for the last 6 years and therefore he had challenged his appeal on that basis against the decision not to entitle him to recover input tax.

Under the heading “Learning issues” it was also recorded that:

“once it was established that there was a visit report concerning the sale of the 3000 Ipod Nanos then HMRC should have made enquiries with the officers who undertook the visit to Tech Freight, to establish the veracity of the chain as it was recorded. Had this been undertaken earlier then Mr Charles may have been more fully informed. . .

Claim in the High Court

Following the publication of the IG report the Respondent brought a Claim for Breach of Statutory Duty, Breach of Contract and Breach of a Common Law Duty of Care.

The Common Law Duty of Care said to arise was as follows:

“The Defendant [HMRC], in exercising its statutory function, had a duty to verify the factual accuracy of its evidence and disclose this matter to the Claimant [Mr Charles]. By not doing so it negligently breached its common law duty of care owed to a taxpayer, particularly one engaged in a Tribunal appeal against the Defendant [HMRC], or there was a breach of statutory duty.”

The Revenue sought to strike out all aspects of the Claim and were successful in persuading the High Court to strike out the Breach of Statutory Duty and Breach of Contract claims. However, the Judge found that there was a realistic prospect that a narrow duty of care may arise at common law and therefore refused to strike that part of the Claim out.

Appeal to the Court of Appeal

The Revenue appealed to the Court of Appeal on the basis that:

  1. The High Court had misapplied the decision of Neil Martin -v- Revenue and Customs Commissioners [2007] STC 180;
  2. The High Court had misapplied the decision of Customs and Excise Commissioners -v- Barclays Bank [2007] 1 AC 181; and
  3. The High Court’s decision was unreasonable in that no Court acting reasonably could have found a duty of care to exist requiring the Revenue to continue to verify the accuracy of the evidence that was relied upon, particularly where they were exercising functions analogous to law enforcement officers (i.e. Hill -v- Chief Constable of West Yorkshire [1988] 2 Al ER 238 and Brooks -v- Metropolitan Police Commissioners and Ors [2005] 2 All ER 489).

The Court of Appeal’s reasons

The Court of Appeal found that the High Court had been correct to accept Mr Carey’s submission that no duty of care could have arisen in the conduct of the investigation in 2006 as the officers were collecting information and carrying out investigations in the public interest. The Court also accepted that the officers did not and could not have had the Respondent in their minds at the time they were undertaking their verification exercise, and in any event it was an administrative error.

However, the Court of Appeal went on to consider the High Court’s refusal to accept that no duty of care arose to verify the factual accuracy of evidence served in proceedings. Lady Justice Asplin, giving judgment for the Court, stated as follows:

“38. In my judgment, there is no real prospect of establishing that a duty of care arose to verify the Visit Report and to rectify it if necessary, once Mr Charles’ reliance upon it for the purposes of his appeal to the UT became clear and the judge was wrong to come to that conclusion at [36] of his judgment. It seems to me that the same would be true in relation to Mr Charles’ reliance upon the Visit Report in the FTT. The point was made succinctly by Lord Bingham in the Barclays Bank case at [18]. As the judge quoted at [32] of his judgment: ” . . . no duty is owed by a litigation party to its opponent: Digital Equipment Corpn v Darkcrest Ltd [1984] Ch 512; Business Computers International v Registrar of Companies [1988] Ch 229; Al-Kandari v J R Brown & Co [1988] QB 655.” The same point was made by Lord Rodger at [47] and [60]. It seems to me that this must be the case even where the opponent relies upon a document which has been created by the other party to the litigation. It is all the more so where the document was produced for a different purpose in the course of fulfilling HMRC’s public duties.

39. Accordingly, it seems to me that there can be no question of an assumption of responsibility by HMRC in relation to Mr Charles’ conduct of his litigation, nor is the incremental test referred to in the Barclays Bank case satisfied. It has already been determined that a party to litigation does not owe a duty of care to the opposing party in that litigation. It also follows that the threefold test cannot be satisfied.

Her Ladyship went on at [41] – [43] to find:

“41. It is for parties to litigation to determine what evidence they will deploy and in what way and to decide how best to conduct litigation. Mr Charles chose to continue to rely upon the Visit Report despite the admission that it probably contained an error and despite the fact that HMRC had succeeded before the FTT and the FTT had taken into consideration a large amount of evidence in addition to the Visit Report

42. The position can be no different because Mr Charles was exercising a statutory right to appeal against the disallowance of input tax for the purposes of his VAT return against a public body. Although the onus was on HMRC to defend the disallowance on that appeal before the FTT, it is difficult to see that, as a result, HMRC assumed a duty to verify all evidence relied upon whether by it or by Mr Charles and to prevent its opponent from taking points about the adequacy of the evidence relied upon. Of course, HMRC, like any other litigant, must not wilfully or recklessly mislead the court. They are not required, however, to ensure that only the best evidence is relied upon. Like any other litigant, HMRC takes the risk that the tribunal or court will consider a matter not to have been proved to the appropriate standard and will be subject to points which will be taken against it in relation to weaknesses in its evidence.

43. If the judge were correct, all litigants would owe a duty to the opposing party in litigation to put forward their very best evidence in relation to every case and to check the evidence relied upon by their opponents, at least if it is based on a document which originated with them. Not only would that create an intolerable and costly burden upon all litigants, it would also have profound effects for the court system. It would have the opposite effect to the overriding objective: CPR r 1.1. If each party were required to file and serve its best evidence on each and every issue, it would prevent the court from dealing with cases at proportionate cost, allotting an appropriate share of court resources and saving expense, amongst other things. To the contrary, all litigation would become unnecessarily lengthy and additionally expensive.


This case emphasises the position that public authorities owe no higher duty of care when conducting civil litigation (including litigation before the Tax Tribunals) than any other litigant does. Simply because the public authority, like the Revenue, is exercising a statutory function and that a person may be challenging a decision of a statutory authority, does not have the effect that they can then subsequently be liable for strategic decisions that are made by parties to that litigation. Parties, and their representatives, remain under a serious obligation not to wilfully or recklessly mislead the Court. However, that obligation does not mean that a party is obliged to put the best evidence before the Court or to verify the evidence that is served upon them. It is the discrepancies in the evidence that allow a party to test their opponent’s case, to probe the correctness of the evidence and to try and shake the foundations of the opposing argument.

If having decided to embark on that process of testing the evidence, it does not lie in the mouth of the party, having so tested it, to then claim damages for having done so. To permit such an approach would simply encourage more litigation between the same parties without there being any end in sight.

Joshua Carey was instructed by George Hobson of the HMRC Solicitor’s Office.

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